Reforms still required across Europe

The first part of 2015 has confirmed the maxim we described in our January: global economic growth remains weak and vulnerable to deflationary pressures, but investors are suddenly regaining their appetite with stronger monetary intervention imminent, this time on the part of the European Central Bank.

It would be wrong for an asset manager to deprive his customers of a particularly enterprising central bank’s generosity. Our portfolios are taking full advantage of the Draghi effect, especially through our positioning in European bonds and the dollar, as well as increased exposure to European equities

Progress is slow, especially in Europe. A few examples: in France, although opinion polls showed that the public supported the Macron bill, neither the left nor the right wing of parliament had the political courage to vote for it. Italy’s Jobs Act was passed, but the institutional reforms needed to stabilise the government are moving very slowly and will still have to make it through the Senate in March. The requirement that Greece’s creditors have made of the new government to commit to reforms whose abandonment had been at the heart of the party’s winning manifesto raises the suspicion of blatant populism and pseudo reformism in equal measure. China’s emphasis on fighting corruption in 2014 delayed the reform programme. But at least we can reasonably hope that reforms concerning public enterprises, real estate, the environment and Hukou status will gather pace in 2015. The same applies in India where land purchase, mining and insurance deregulation reforms are due to be debated in parliament this year.

Didier-Saint Georges is managing director and member of the Investment Committee at Carmignac Gestion